What to do in 2025, and beyond . . . . .

Stock markets deliver about 5-6% p.a. more than fixed income over a longer period of 5-7 years. In other words, if a bank FD gives you 7.5% p.a., then stock markets can deliver ~ 12-13% p.a.

Why then does everybody not invest in stock markets, and make 5% more at a more efficient tax rate?

Because markets are not linear. People look at returns everyday and can’t stomach the volatility. If markets give you 20% upside followed by another 20% upside in the next year, it is certain that they will fall by 15% in the third 4th or 5th year. Point being, markets are not linear. Here’s a past 5 year chart for stocks markets (click on the chart to expand):

Those who make money are the ones who can stay invested for at least 5+ year and believe – you will never, NEVER lose money if you stick around for that time horizon. Over the past 20 years that I have been in the markets, I have seen the 2021-24 bull run as well as the 2008-09 crash as well. In any rolling 5 year period, the above chart can be replicated. Note: In the above above chart between March 2020 and May 2020, markets fell by over 30%. Yet those who did nothing, have made 14.09% over the past years.

We are in a phase of consolidation where markets will go sideways. The most prudent approach will be to realign your portfolios in line with market valuations and wait for 2-3 years. You will make a lot of money. If you cannot wait for this time, stick to traditional fixed income products – bonds, FDs and structured products.

Themes to focus on – FMCG and broader consumption, Technology and Banking and Finance.

The idea of buying stocks for me has always been about generating alpha, beating the market, earning a good dividend, and staying invested for many years. All you have to do is beat the market by 6%+ consistently for many years. The problem, however, is that market returns are not linear. There will be years in which you will underperform (and outperform the market by a mile). Give yourself at least 6 years to generate that 6% p.a. alpha. It is simple to achieve this if you buy and wait for the story to play out.

  • Avoid get-rich-quick schemes
  • Buy high-quality stocks but diversify your portfolio (most important)
  • Have diversified sources of revenue (unless you are absolutely convinced about living on a salary for the rest of your life)
  • Invest and build a portfolio with a view to not sell your investments for at least 10 years. Remember: If your idea is to invest and make money in 2025 – you will either lose or be accidentally lucky by selling in time.